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SpePharm AG v. Eisai Inc.

United States District Court, D. Delaware

September 4, 2019

SPEPHARM AG, Plaintiff,
v.
EISAI INC., Defendant.

          Brian E. Farnan and Michael J. Farnan, FARNAN LLP, Wilmington, DE; Martin J. Black (argued), Joseph J. Gribbin, and Luke M. Reilly, DECHERT LLP, Philadelphia, PA; Katherine A. Helm, DECHERT LLP, New York, NY. Attorneys for Plaintiff.

          Joel Friedlander, Christopher M. Foulds, and Christopher P. Quinn, FRIEDLANDER & GORRIS, P.A., Wilmington, DE; Benjamin J. Razi (argued), Dennis B. Auerbach, and Jon-Michael Dougherty, COVINGTON & BURLING LLP, Washington, DC. Attorneys for Defendant.

          MEMORANDUM OPINION

          ANDREWS, U.S. DISTRICT JUDGE

         Presently before me are Plaintiffs Motion for Judgment on the Pleadings (D.I. 40), Defendant's Cross-Motion for Judgment on the Pleadings (D.I. 45), and Plaintiffs Motion to Strike Portions of Eisai's Reply Brief (D.I. 53). The Parties have fully briefed the issues. (D.I. 41, 46, 47, 49, 51, 56, 57). I heard oral argument on August 9, 2019. For the reasons set out more fully below, I will grant Plaintiffs Motion for Judgment on the Pleadings. Accordingly, I will deny Defendant's motion and dismiss Plaintiffs Motion to Strike as moot.

         I. Background

         Salagen is a drug used to treat dry mouth caused by radiation therapy for head and neck cancer and to treat dry mouth and dry eyes in individuals with Sjogren's syndrome. (D.I. 3, Compl. at ¶ 7). This case is about Plaintiffs license to distribute Salagen in certain European and Commonwealth of Independent States countries.[1] (Id.).

         SpePharm and Eisai are the current[2] parties to three contracts that cover the distribution of Salagen: an April 11, 2000 license agreement ("License Agreement"), an April 11, 2000 supply agreement, and a July 29, 2009 pharmacovigilance agreement ("Pharmacovigilance Agreement").[3] (Id. at ¶ 6). Per these agreements, Plaintiff is the exclusive licensee of Salagen in its territory. (Id. at ¶ 7). Defendant is required to supply Salagen, and other services, to Plaintiff during the term of the License Agreement. (Id.).

         The original term of the License Agreement, found in Section 11.1, provided for a minimum 12-year contract duration with rolling automatic continuations, assuming neither party sent notice of termination, into perpetuity:

The term of this Agreement shall commence on the Effective Date and unless earlier terminated in accordance with the provisions of Article 11, shall continue in full force and effect until the twelfth (12th) anniversary of the Effective Date. Thereafter the term of this Agreement shall automatically be extended for additional two (2) year terms, unless written notice of termination is given by one party. Notice of intent to terminate on the anniversary of the original term or any subsequent extension shall be provided no later than 180 days prior to such anniversary date.

(D.I. 3, Compl. Exh. A at § 11.1). The original term of the License Agreement, therefore, extended until April 11, 2012.

         In May 2015, Novartis Pharma AG ("Novartis"), the licensee at that time, and Eisai, at that point the licensor, negotiated an amendment to the License Agreement. (D.I. 3, Compl. at ¶ 17-19). Amendment 2 to the License Agreement provided the licensee with an option:

As of the date of this Amendment, a permitted third-party transferee under Section 16.3 shall have the option, exercisable in its sole discretion upon written notice to Eisai, to amend the term contained in Section 11.1 such that the Agreement will expire on April 11, 2026. In the event such permitted third-party transferee exercises such option, following April 11, 2026 (i) the term will automatically be extended for additional two (2) year terms unless written notice of termination is given by a Party and (ii) notice of intent to terminate on the anniversary of the term or any subsequent extension shall be provided no later than 180 days prior to such anniversaly date. In the event such permitted third-party transferee does not exercise such option, the term contained in Section 11.1 will remain as is.

(D.I. 3, Compl. Exh. A at Amend. 2, ¶ 2). As consideration for this option, Novartis paid Eisai $500, 000. (Id. at¶ 1). Novartis also agreed to an augmented minimum royalty scheme. (Id.).

         On May 20, 2015, Eisai consented to Novartis's request to assign the License Agreement to Merus. (D.I. 3, Compl. at ¶ 20). In 2018, Eisai allowed Merus to assign ...


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